Affordable Housing Program Amendments: Federal Home Loan Bank Mortgage Refinancing Authority, 61660-61665 [E8-24320]

Download as PDF 61660 Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105–277, 112 Stat. 2681). The interim rule should have a positive effect on families by clarifying the coverage rules for mortgage servicing accounts, which contain, for some period of time, the mortgage payments from borrowers. VII. Small Business Regulatory Enforcement Fairness Act The Office of Management and Budget has determined that the interim rule is not a ‘‘major rule’’ within the meaning of the relevant sections of the Small Business Regulatory Enforcement Act of l996 (‘‘SBREFA’’) (5 U.S.C. 801 et seq.). As required by SBREFA, the FDIC will file the appropriate reports with Congress and the General Accounting Office so that the interim rule may be reviewed. List of Subjects in 12 CFR Part 330 Bank deposit insurance, Banks, banking, Reporting and recordkeeping requirements, Savings and loan associations, Trusts and trustees. ■ For the reasons stated above, the Board of Directors of the Federal Deposit Insurance Corporation amends part 330 of chapter III of title 12 of the Code of Federal Regulations as follows: PART 330—DEPOSIT INSURANCE COVERAGE (d) Mortgage servicing accounts. Accounts maintained by a mortgage servicer, in a custodial or other fiduciary capacity, which are comprised of payments by mortgagors of principal and interest, shall be insured for the cumulative balance paid into the account by the mortgagors, up to a limit of the SMDIA per mortgagor. Accounts maintained by a mortgage servicer, in a custodial or other fiduciary capacity, which are comprised of payments by mortgagors of taxes and insurance premiums shall be added together and insured in accordance with paragraph (a) of this section for the ownership interest of each mortgagor in such accounts. This provision is effective as of October 10, 2008, for all existing and future mortgage servicing account. * * * * * By order of the Board of Directors. Dated at Washington DC., this 10th day of October 2008. Federal Deposit Insurance Corporation. Valerie J. Best, Assistant Executive Secretary. [FR Doc. E8–24626 Filed 10–16–08; 8:45 am] BILLING CODE 6714–01–P FEDERAL HOUSING FINANCE BOARD 12 CFR Part 951 FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1291 1. The authority citation for part 330 continues to read as follows: ■ RIN 2590–AA04 Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q), 1819 (Tenth), 1820(f), 1821(a), 1822(c). Affordable Housing Program Amendments: Federal Home Loan Bank Mortgage Refinancing Authority 2. In § 330.1, paragraph (n) is revised to read as follows: ■ § 330.1 Definitions. jlentini on PROD1PC65 with RULES * * * * * (n) Standard maximum deposit insurance amount, referred to as the ‘‘SMDIA’’ hereafter, means $250,000 from October 3, 2008, until December 31, 2009. Effective January 1, 2010, the SMDIA means $100,000 adjusted pursuant to subparagraph (F) of section 11(a)(1) of the FDI Act (12 U.S.C. 1821(a)(1)(F)). All examples in this part use $100,000 as the SMDIA. * * * * * ■ 3. In § 330.7, paragraph (d) is revised to read as follows: § 330.7 Account held by an agent, nominee, guardian, custodian or conservator. * * * VerDate Aug<31>2005 * * 17:16 Oct 16, 2008 Jkt 217001 Federal Housing Finance Agency. ACTION: Interim final rule with request for comments. AGENCY: SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing and seeking comment on an interim final rule to implement section 1218 of the Housing and Economic Recovery Act of 2008 (Recovery Act), which requires the FHFA to allow the Federal Home Loan Banks (Banks) until July 30, 2010, to use Affordable Housing Program (AHP) homeownership set-aside funds to refinance low- or moderate-income households’ mortgage loans. This rulemaking relocates the AHP regulation to the FHFA rules, and adds new provisions that allow the Banks to use AHP set-aside funds to provide direct subsidies to low- or moderate-income households who qualify for refinancing PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 assistance under the HOPE for Homeowners Program established by the Federal Housing Administration (FHA) under Title IV of the Recovery Act. This interim final rule is effective October 17, 2008. The FHFA will accept written comments on the interim final rule on or before December 16, 2008. Comments: Submit comments to the FHFA using any one of the following methods: E-mail: comments@fhfb.gov. Please include RIN 2590–AA04 in the subject line of the message. Fax: 202–408–2580. Mail/Hand Delivery: Federal Housing Finance Board, 1625 Eye Street, NW., Washington, DC 20006, Attention: Public Comments/RIN 2590–AA04. Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by e-mail to the FHFA at comments@fhfb.gov to ensure timely receipt by the agency. Include the following information in the subject line of your submission: Federal Housing Finance Agency. Interim Final Rule: Affordable Housing Program Amendments: Federal Home Loan Bank Mortgage Refinancing Authority. RIN 2590–AA04. We will post all public comments we receive without change, including any personal information you provide, such as your name and address, on the FHFA Web site at http://www.fhfb.gov/ Default.aspx?Page=93&Top=93. ADDRESSES: FOR FURTHER INFORMATION CONTACT: Sylvia Martinez, Senior Policy Analyst, 202–408–2825, martinezs@fhfb.gov; or Amy Bogdon, Senior Advisor, 202–408– 2546, bogdona@fhfb.gov. For legal questions: Sharon B. Like, Senior Attorney-Advisor, 202–408–2930, likes@fhfb.gov. You can send regular mail to the Federal Housing Finance Board, 1625 Eye Street, NW., Washington, DC 20006. SUPPLEMENTARY INFORMATION: I. Background A. Federal Housing Finance Regulatory Reform Act of 2008 Effective July 30, 2008, Division A of the Housing and Economic Recovery Act of 2008, Public Law No. 110–289, 122 Stat. 2654 (2008), titled the Federal Housing Finance Regulatory Reform Act of 2008 (Reform Act), created the Federal Housing Finance Agency (FHFA) as an independent agency of the federal government. The Reform Act E:\FR\FM\17OCR1.SGM 17OCR1 Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations jlentini on PROD1PC65 with RULES transferred the supervisory and oversight responsibilities over the Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, Enterprises), the Federal Home Loan Banks (Banks), and the Bank System’s Office of Finance, from the Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB) to the FHFA. The Reform Act provides for the abolishment of OFHEO and the FHFB one year after the date of enactment. The FHFA is responsible for ensuring that the Enterprises and the Banks operate in a safe and sound manner, including being capitalized adequately, and carry out their public policy missions, including fostering liquid, efficient, competitive, and resilient national housing finance markets. The Enterprises and the Banks continue to operate under regulations promulgated by OFHEO and the FHFB until the FHFA issues its own regulations. B. The Banks’ Affordable Housing Program Section 10(j) of the Federal Home Loan Bank Act (Bank Act) requires each Bank to establish an affordable housing program, the purpose of which is to enable a Bank’s members to finance homeownership by households with incomes at or below 80 percent of the area median income (low- or moderateincome households), and to finance the purchase, construction, or rehabilitation of rental projects in which at least 20 percent of the units will be occupied by and affordable for households earning 50 percent or less of the area median income (very low-income households). See 12 U.S.C. 1430(j)(1) and (2). The Bank Act requires each Bank to contribute 10 percent of its previous year’s net earnings to its AHP annually, subject to a minimum annual combined contribution by the 12 Banks of $100 million. See 12 U.S.C. 1430(j)(5)(C). Section 1218 of the Reform Act amended section 10(j) by adding a new paragraph (2)(C) that requires the FHFA to allow the Banks until July 30, 2010, to use AHP homeownership set-aside funds to refinance low- or moderateincome households’ first mortgage loans on their primary residences. See 12 U.S.C. 1430(j)(2)(C). The Director of the FHFA must establish the percentage of set-aside funds eligible for this use by regulation. The FHFB regulation implementing the AHP provisions of the Bank Act, previously codified at 12 CFR part 951, is relocated by this rulemaking to part 1291. The following discussion uses the VerDate Aug<31>2005 17:16 Oct 16, 2008 Jkt 217001 new numbering references. Among other things,1 the AHP regulation authorizes a Bank, in its discretion, to set aside a portion of its annual required AHP contribution to establish homeownership set-aside programs for the purpose of promoting homeownership for low- or moderateincome households. See 12 CFR 1291.6. Under the homeownership set-aside programs, a Bank may provide AHP direct subsidy (grants) to members to pay for down payment assistance, closing costs, and counseling costs in connection with a household’s purchase of its primary residence, and for rehabilitation assistance in connection with a household’s rehabilitation of an owner-occupied residence. See 12 CFR 1291.6(c)(4). The AHP regulation does not authorize the Banks to use AHP setaside funds for refinancing of mortgages. Currently, a Bank may allocate up to the greater of $4.5 million or 35 percent of its annual required AHP contribution to homeownership set-aside programs in that year, provided that at least onethird of the Bank’s annual set-aside allocation is targeted to first-time homebuyers. See 12 CFR 1291.2(b)(2)(i). In January 2008, the FHFB waived certain provisions of the AHP homeownership set-aside program rule to allow the Federal Home Loan Bank of San Francisco (San Francisco Bank) to establish a temporary pilot program to provide AHP direct subsidy to enable a household with a subprime or nontraditional loan held by a San Francisco Bank member or its affiliate to refinance or restructure the loan into an affordable, long-term fixed-rate mortgage. See FHFB Resolution 2008–01 (Jan. 15, 2008). The authority will expire on December 31, 2009. In April 2008, the FHFB published a proposed rule that would have temporarily extended the authority to use set-aside funds for mortgage refinancing or restructuring to all of the Banks. See 73 FR 20552 (Apr. 16, 2008). The FHFB received 36 comments on the proposal. Commenters who supported use of AHP funds for refinancing suggested flexibility in the rules governing use of the funds so the Banks and their members would be able to assist a greater number of borrowers in distress, including allowing use of AHP set-aside funds in conjunction with other federal, state or local mortgage refinancing programs. 1 In addition to the discretionary set-aside authority, the AHP regulation requires that each Bank establish a competitive application program under which the Bank’s members may apply for AHP subsidies pursuant to eligibility requirements and scoring criteria set forth in the regulation and implemented through Bank policies. See 12 CFR 1291.5. PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 61661 Before the FHFB took final action on the proposed amendments to the AHP rule, the Reform Act added section 10(j)(2)(C) to the Bank Act. Title IV of the Recovery Act also required establishment by the FHA of the HOPE for Homeowners Program, a temporary program expected to be implemented by October 1, 2008, and which will expire on September 30, 2011. Participation in the HOPE for Homeowners Program is voluntary on the part of homeowners and existing loan holders. Under the HOPE for Homeowners Program, FHAapproved lenders may refinance loans that will qualify for FHA insurance if the amount of the loan is reduced to no more than 90 percent of the currently appraised value of the owner-occupied property. The FHA insurance premium, which equals 3 percent of the remaining principal, is deducted upfront. The borrower will pay an annual premium of 1.5 percent of the outstanding mortgage amount. The purpose of the HOPE for Homeowners Program, like that of the Banks’ refinancing authority under the AHP, is to assist distressed homeowners and support long-term affordable homeownership. The FHFA believes that use of AHP subsidy in conjunction with the HOPE for Homeowners Program will leverage and enhance the effectiveness of each program, ensure that the full range of federal assistance to affected homeowners is available quickly, and provide the flexibility that the Banks and their members need to make the AHP refinancing program successful. In adopting this approach, the FHFA has consulted with the FHA. Linking the use of the AHP subsidy to refinancing under the HOPE for Homeowners Program also would be consistent with the requirement in section 10(j)(9)(G) of the Bank Act that the AHP rule coordinate AHP activities with other federal or federallysubsidized affordable housing activities to the maximum extent possible. See 12 U.S.C. 1430(j)(9)(G). Accordingly, this interim final rule authorizes a Bank, in its discretion, to temporarily establish a homeownership set-aside program for the use of AHP direct subsidy by its members to assist in the refinancing of a household’s mortgage loan under the FHA’s HOPE for Homeowners Program. Section 1201 of the Reform Act requires the Director of the FHFA to consider the differences between the Banks and the Enterprises in rulemakings that affect the Banks with respect to the Banks’ cooperative ownership structure, mission of providing liquidity to members, affordable housing and community development mission, capital structure, E:\FR\FM\17OCR1.SGM 17OCR1 61662 Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations and joint and several liability. 12 U.S.C. 4513(f). In preparing the interim final rule, the Director considered these factors and determined that the rule is appropriate, particularly because the AHP regulation implements a statutory provision of the Bank Act that applies only to the Banks. See 12 U.S.C. 1430(j). II. Analysis of the Interim Final Rule A. Relocation of AHP Rule to Part 1291 The interim final rule relocates the AHP rule from part 951 of the FHFB regulations to part 1291 of the FHFA regulations, and renames the new part to read ‘‘Federal Home Loan Banks’ Affordable Housing Program’’. The rule also renumbers references within the rule to reflect its new part number. jlentini on PROD1PC65 with RULES B. Authority To Establish Mortgage Refinancing Program: § 1291.6(f)(1) The interim final rule adds a new paragraph (f) under the existing AHP homeownership set-aside program provisions of § 1291.6 of the AHP regulation, that authorizes a Bank, in its discretion, to temporarily establish a homeownership set-aside program for the use of AHP direct subsidy by its members to assist in the refinancing of a household’s mortgage loan under FHA’s HOPE for Homeowners Program. 12 CFR 1291.6(f). As a general proposition, any such new refinancing program must comply with the existing requirements in § 1291.6, except for certain specified provisions, as well as with the requirements of part 1291. Thus, the existing provisions in § 1291.6 governing eligible member applicants, member allocation criteria, household income eligibility, maximum subsidy per household limit of $15,000, de minimis cash backs, application approvals, funding procedures, reservation of subsidies, and progress towards use of the subsidy, all apply to a Bank’s mortgage refinancing program. See 12 CFR 1291.6(b), (c)(1), (c)(2)(i), (c)(3), (c)(9), (d), (e). Similarly, a Bank’s mortgage refinancing program must otherwise meet the requirements of part 1291, including the monitoring, remedial actions for member noncompliance, and agreements provisions in §§ 1291.7, 1291.8, and 1291.9, respectively, other than the requirement in § 1291.9(a)(7) for fiveyear retention agreements in connection with a household’s subsequent sale or refinancing of the unit. The interim final rule provides that the provisions in § 1291.6 governing household completion of a counseling program, first-time homebuyer and additional discretionary household eligibility criteria, eligible uses of AHP VerDate Aug<31>2005 17:16 Oct 16, 2008 Jkt 217001 subsidy, five-year retention agreements, lender financial or other concessions, loan financing costs, and counseling costs requirements, all do not apply to the new refinancing programs. See 12 CFR 1291.6(c)(2)(ii), (c)(2)(iii), (c)(4)– (c)(8). C. Funding Allocation: § 1291.2(b)(2)(i) In order to maximize the Banks’ role in responding to the current national mortgage crisis, the interim final rule allows a Bank to allocate the maximum permissible homeownership set-aside allocation entirely to a mortgage refinancing program established under new paragraph (f). See 12 CFR 1291.2(b)(2)(i). The interim final rule further provides that if a Bank sets aside funds solely for homeownership setaside programs other than a mortgage refinancing program established under paragraph (f), at least one-third of the Bank’s aggregate annual set-aside allocation to such programs shall be to assist first-time homebuyers. This is consistent with the current one-third first-time homebuyers requirement. D. Eligible Loans: § 1291.6(f)(2) Under the interim final rule, a loan is eligible to be refinanced with AHP direct subsidy if the loan is secured by a first mortgage on an owner-occupied unit that is the primary residence of the household, and the loan is refinanced under the HOPE for Homeowners Program. 12 CFR 1291.6(f)(2). In order to be refinanced under the HOPE for Homeowners Program, the loan must meet all applicable underwriting requirements and other FHA standards for the HOPE for Homeowners Program. The FHFA believes that these requirements and standards will provide both adequate protections to borrowers whose loans will be refinanced and protect the integrity of the AHP. For example, under the HOPE for Homeowners Program and FHA standards: • The borrower must be unable to afford its existing mortgage payments; the borrower’s mortgage debt-to-income ratio, as of March 1, 2008, must have been greater than 31 percent, or such higher amount as the FHA determines appropriate; • The principal amount of the refinanced loan shall not exceed 90 percent of the currently appraised value of the property; • The refinanced loan must be a fixed-rate, fully amortizing, 30-year loan; • Prepayment fees must be waived; • All fees and penalties related to default or delinquency on the original mortgage must be waived or forgiven; PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 • Any outstanding mortgage liens on the property shall be removed; • Investor-owned properties are not eligible—the borrower must be an owner-occupant; • The borrower must have verified income based on an IRS tax return or other equivalent standards; • The borrower may be charged only reasonable and customary closing costs established by the FHA; • Origination fees are subject to limitation; and • Rates on refinanced mortgages must be commensurate with market interest rates. There are other programs that provide refinancing assistance to distressed borrowers. The Enterprises offer programs that allow for loan modifications targeted at subprime mortgage borrowers but which do not require that lenders take an initial writedown based on the current appraised value. The FHA offers a refinancing option in addition to the HOPE for Homeowners Program called FHA Secure. Under FHA Secure, any mortgage payment arrearage on the first loan can be rolled into a new FHAinsured loan. Further, lenders have the option of placing a second lien on the property if the borrower owes more than the property is worth or exceeds the FHA loan limit or to cover prepayment penalties and arrearages. In addition, state housing finance agencies are developing their own refinancing programs to assist distressed homeowners. Because these programs are diverse and emerging, the FHFA has not analyzed their specific merits. The FHFA requests comment on whether the rule should authorize the Banks to use AHP set-aside funds to assist homeowners refinancing under other programs intended to aid distressed homeowners, such as those offered by the Enterprises, FHA Secure, or any state housing finance agency programs. In addition, the FHFA requests comment on how the standards for these programs will assure the affordability of the housing costs to the borrower and the sustainability of the refinanced loan. E. Eligible Uses of AHP Subsidy: § 1291.6(f)(3) The interim final rule allows members to provide AHP direct subsidy for two uses. 12 CFR 1291.6(f)(3). A member may use the subsidy to reduce the outstanding principal balance of the household’s loan below the maximum loan-to-value ratio required under the HOPE for Homeowners Program in order to enable the household to meet the applicable mortgage debt-to-income E:\FR\FM\17OCR1.SGM 17OCR1 Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations ratio requirements under such Program, i.e., to make the refinanced loan affordable to the household. This use of the AHP subsidy is consistent with the current AHP rule, which permits use of the AHP subsidy to pay for down payment assistance in connection with the purchase of a home under the homeownership set-aside program. See 12 CFR 1291.6(c)(4). In addition, under the new AHP refinancing authority, a member may use the AHP subsidy to pay FHA-approved loan closing costs. This use of AHP subsidy also is consistent with the current AHP rule, which permits use of the AHP subsidy to pay for closing costs in connection with the purchase of a home under the homeownership set-aside program. See 12 CFR 1291.6(c)(4) and (8). jlentini on PROD1PC65 with RULES F. Eligible Lender Participants: § 1291.6(f)(4) Under the interim final rule, a Bank may provide the AHP direct subsidy to members that are FHA-approved lenders for the purpose of refinancing an eligible loan with an FHA-insured loan by the member. A Bank may also, in its discretion, provide the AHP subsidy to members that will provide the subsidy to FHA-approved lenders that are not members of the Bank for the purpose of refinancing an eligible loan if, after consulting with the Bank’s Advisory Council, the Bank determines that such action would be in the best interests of borrowers in the Bank’s district. 12 CFR 1291.6(f)(4). Providing the subsidy to members, or to members who provide it to nonmembers, is consistent with the current AHP homeownership set-aside process under which a Bank provides the AHP subsidy to a member for use in conjunction with making a loan to a borrower, or to a member that provides the subsidy to another member or nonmember lender to make an AHPassisted loan to a borrower. G. AHP Retention Agreements The interim final rule does not require five-year retention agreements as required under the current AHP regulation and, therefore, does not require repayment of AHP subsidy by a household in the event of a subsequent sale or refinancing of the unit during the five-year retention period. See 12 CFR 1291.6(c)(5) and 1291.9(a)(7). The FHFA has decided not to include this requirement because the HOPE for Homeowners Program includes a requirement generally that any appreciation or equity created as a result of a sale or refinancing during the fiveyear period must be shared between the FHA, the borrower, and any subordinate mortgage holder whose lien was VerDate Aug<31>2005 17:16 Oct 16, 2008 Jkt 217001 extinguished as part of the refinancing under the Program. See Reform Act at sec. 1402(a) (National Housing Act sec. 257(e)(4)(B), and (k)). H. Monitoring: § 1291.7(b) The interim final rule amends existing § 1291.7(b), which sets forth the monitoring requirements for homeownership set-aside programs generally, to make a Bank’s mortgage refinancing program subject to those monitoring requirements. Thus, a Bank’s written monitoring policies for its homeownership set-aside programs must include requirements for: (i) Determining whether AHP subsidy was provided to households with incomes at or below 80 percent of the area median income as required in § 1291.6(c)(2)(i), and all other applicable eligibility requirements in § 1291.6(c) and (f); (ii) Bank review of member certifications, prior to disbursement of the AHP subsidy, that the subsidy will be provided in compliance with all applicable eligibility requirements in § 1291.6(c) and (f); and (iii) Bank review of back-up documentation regarding household incomes maintained by the member, and maintenance and Bank review of other documentation in the Bank’s discretion. I. Sunset Date: § 1291.6(f)(5) The interim final rule includes a provision terminating the Banks’ authority to commit AHP subsidy for refinancing after July 30, 2010, which is the expiration date of the two-year period in section 1218 of the Reform Act. 12 CFR 1291.6(f)(5). The rule allows lenders to use AHP subsidy committed by that date to refinance loans that are in the pipeline. This means that a lender may use the AHP subsidy for a loan that was submitted to the FHA for approval on or before July 30, 2010 that is approved for refinancing under the HOPE for Homeowners Program after that date. Title IV of the Reform Act provides that the sunset date for the HOPE for Homeowners Program is September 30, 2011. See Reform Act at sec. 1402(a) (National Housing Act sec. 257(r)). In light of our view that prior to its amendment by the Reform Act, section 10(j) of the Bank Act provided the legal authority for the FHFA to permit the Banks to use AHP subsidy to pay costs associated with refinancing existing mortgage loans, see 73 FR at 20553–55, the FHFA requests comment on whether it should extend the sunset date to be co-extensive with that of the HOPE for Homeowners Program. The FHFA invites comments on all aspects of the interim final rule. PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 61663 III. Notice and Public Participation The FHFA for good cause finds that the notice and comment procedure required by the Administrative Procedure Act is impracticable or contrary to the public interest in this instance. See 5 U.S.C. 553(b)(3)(B). Section 1218 of the Reform Act requires that the FHFA’s regulations authorize the use of AHP subsidy for mortgage refinancing for a two-year period commencing on July 30, 2008. Issuance of an interim final rule will enable the Banks to expedite implementation of AHP mortgage refinancing programs pursuant to section 1218. The delay that would ensue during a proposed notice and comment rulemaking would significantly curtail the available period of time for implementation and operation of AHP mortgage refinancing programs by the Banks. However, because the FHFA believes that public comments are valuable, it encourages comments on this interim final rule, and will consider all comments received on or before December 16, 2008 in promulgating a final rule. IV. Effective Date For the reasons stated in part III above, the FHFA for good cause finds that the interim final rule should become effective on October 17, 2008. See 5 U.S.C. 553(d)(3). V. Paperwork Reduction Act The information collection contained in the current AHP regulation, entitled ‘‘Affordable Housing Program (AHP),’’ has been assigned control number 3069– 0006 by the Office of Management and Budget (OMB). The interim final rule does not substantively or materially modify the approved information collection. Consequently, the FHFA has not submitted any information to OMB for review under the Paperwork Reduction Act of 1995 (PRA). See 44 U.S.C. 3501 et seq. VI. Regulatory Flexibility Act The FHFA is adopting this regulation in the form of an interim final rule and not as a proposed rule. Therefore, the provisions of the Regulatory Flexibility Act do not apply. See 5 U.S.C. 601(2) and 603(a). List of Subjects in 12 CFR Parts 951 and 1291 Community development, Credit, Federal home loan banks, Housing, Reporting and recordkeeping requirements. For the reasons stated in the preamble, the FHFA hereby amends chapters IX ■ E:\FR\FM\17OCR1.SGM 17OCR1 61664 Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations and XII of title 12 of the Code of Federal Regulations as follows: CHAPTER XII—FEDERAL HOUSING FINANCE AGENCY 1. Amend title 12 CFR chapter XII by establishing subchapter E, consisting of parts 1280 through 1299, to read as follows: ■ Subchapter E—Housing Goals and Mission CHAPTER IX—FEDERAL HOUSING FINANCE BOARD PART 951—AFFORDABLE HOUSING PROGRAM 2. Transfer 12 CFR part 951 from chapter IX, subchapter G, to chapter XII, subchapter E and redesignate as 12 CFR part 1291. PART 1291—FEDERAL HOME LOAN BANKS’ AFFORDABLE HOUSING PROGRAM 3. The authority citation for the newly redesignated part 1291 continues to read as follows: ■ ■ Authority: 12 U.S.C. 1430(j). 3A. Revise the heading of newly redesignated part 1291 to read as set forth above. ■ 4. Amend the newly redesignated part 1291 as follows: ■ Amend: By removing the reference to: And adding in its place: § 1291.1, definition of ‘‘Affordable’’ ........................... § 1291.1, definition of ‘‘Competitive application program’’. § 1291.1, definition of ‘‘Homeownership set-aside program’’. § 1291.3(a)(1) ............................................................ § 1291.3(a)(2) ............................................................ § 1291.3(a)(3) ............................................................ § 1291.3(a)(4) ............................................................ § 1291.3(a)(5) ............................................................ § 1291.3(a)(6) ............................................................ § 1291.3(a)(7) ............................................................ § 1291.3(a)(8) ............................................................ § 1291.5(c)(9)(i) ......................................................... § 1291.5(c)(9)(ii) ........................................................ § 1291.5(c)(10)(ii) ...................................................... § 1291.5(c)(10)(iii) ..................................................... § 1291.5(c)(13)(iii)(A) ................................................ § 1291.5(c)(13)(iii)(B) ................................................ § 1291.5(c)(14)(iii) ..................................................... § 951.1 of this part ................................................... § 951.5 of this part ................................................... § 1291.1. § 1291.5. § 951.6 of this part ................................................... § 1291.6. § 951.1 of this part ................................................... § 951.5 of this part ................................................... § 951.6 of this part ................................................... § 951.5(c)(13) of this part ......................................... § 951.5(c)(14) of this part ......................................... § 951.7 of this part ................................................... § 951.8(f)(2) of this part ........................................... § 951.9(a)(7) and (a)(8) of this part ......................... § 951.9(a)(7) of this part .......................................... § 951.9(a)(8) of this part .......................................... § 951.5(c)(13) of this part ......................................... § 951.5(c)(14) of this part ......................................... §§ 951.7(a) and 951.9 of this part ........................... §§ 951.8 and 951.9 of this part ................................ § 951.7(a), 951.8, and 951.9, respectively, of this part. § 951.5(f) of this part ................................................ § 951.8(f)(2) of this part ........................................... § 951.3 of this part ................................................... § 951.5(e) of this part ............................................... § 951.2(b)(2) of this part .......................................... § 951.9(a)(7) of this part .......................................... § 951.9(a)(7) or (a)(8), respectively, of this part ...... § 951.1 of this part ................................................... § 951.6(c)(2) of this part ........................................... § 951.6(c) of this part ............................................... § 951.6(c)(5) of this part ........................................... § 951.6(c) of this part ............................................... § 951.5(f) of this part ................................................ § 907.9 of this chapter ............................................. § 951.8(b)(1) of this part .......................................... § 951.8(b)(2)(i) or (b)(2)(ii) of this part ..................... § 951.8(b)(2)(i) of this part ....................................... § 951.7 of this part ................................................... § 951.7 of this part ................................................... § 951.8(f)(2) of this part ........................................... § 951.8(f)(2) .............................................................. § 951.5(c)(13) of this part ......................................... § 951.8(b)(2)(ii) of this part ...................................... § 951.2(a) of this part ............................................... § 951.2(a) of this part ............................................... § 951.2(a) of this part ............................................... § 1291.1. § 1291.5. § 1291.6. § 1291.5(c)(13). § 1291.5(c)(14). § 1291.7. § 1291.8(f)(2). § 1291.9(a)(7) and (8). § 1291.9(a)(7). § 1291.9(a)(8). paragraph (c)(13) of this section. paragraph (c)(14) of this section. §§ 1291.7(a) and 1291.9. §§ 1291.8 and 1291.9. §§ 1291.7(a), 1291.8, and 1291.9. § 1291.5(c)(16)(i)(A) .................................................. § 1291.5(g)(6) ............................................................ § 1291.5(h)(1)(i) ........................................................ § 1291.5(h)(1)(ii) ........................................................ § 1291.6(c)(2)(iii) ....................................................... § 1291.6(c)(5) ............................................................ § 1291.7(a)(1)(i)(C)(4) ............................................... § 1291.7(a)(5) ............................................................ § 1291.7(b)(1)(i) ........................................................ § 1291.7(b)(1)(ii) ........................................................ § 1291.7(b)(1)(ii) ........................................................ § 1291.7(b)(2)(i) ........................................................ § 1291.8(c)(2) ............................................................ § 1291.8(i) ................................................................. § 1291.9(a)(4)(i) ........................................................ § 1291.9(a)(4)(ii)(A) ................................................... § 1291.9(a)(4)(ii)(B) ................................................... § 1291.9(a)(5)(i) ........................................................ § 1291.9(a)(5)(ii) ........................................................ § 1291.9(a)(7)(iii)(A) .................................................. § 1291.9(a)(7)(iii)(B) .................................................. § 1291.9(a)(9) ............................................................ § 1291.9(b) ................................................................ § 1291.11(a) .............................................................. § 1291.12(a) .............................................................. § 1291.12(b) .............................................................. 5. In newly redesignated part 1291, revise all references to ‘‘Finance Board’’ to read ‘‘FHFA’’. jlentini on PROD1PC65 with RULES ■ 6. In newly redesignated § 1291.1, add the following definitions in alphabetical order: ■ VerDate Aug<31>2005 17:16 Oct 16, 2008 Jkt 217001 § 1291.1 Definitions. * * * * * Director means the Director of the Federal Housing Finance Agency, or his or her designate. * * * * * PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 paragraph (f) of this section. § 1291.8(f)(2). § 1291.3. paragraph (e) of this section. § 1291.2(b)(2). § 1291.9(a)(7). § 1291.9(a)(7) or (8). § 1291.1. § 1291.6(c)(2). § 1291.6(c). § 1291.6(c)(5). § 1291.6(c). § 1291.5(f). 12 CFR 907.9. § 1291.8(b)(1). § 1291.8(b)(2)(i) or (ii). § 1291.8(b)(2)(i). § 1291.7. § 1291.7. § 1291.8(f)(2). § 1291.8(f)(2). § 1291.5(c)(13). § 1291.8(b)(2)(ii). § 1291.2(a). § 1291.2(a). § 1291.2(a). FHFA means the Federal Housing Finance Agency. * * * * * 7. Amend § 1291.2(b)(2)(i) to read as follows: ■ E:\FR\FM\17OCR1.SGM 17OCR1 Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations § 1291.2 Required annual AHP contributions; allocation of contributions. * * * * * (b) * * * (2) Homeownership set-aside programs—(i) Allocation amount; firsttime homebuyers. (A) A Bank, in its discretion, may set aside annually, in the aggregate, up to the greater of $4.5 million or 35 percent of the Bank’s annual required AHP contribution to provide funds to members participating in homeownership set-aside programs, including a mortgage refinancing setaside program established under paragraph (f) of this section, pursuant to the requirements of this part. (B) If a Bank sets aside funds solely for homeownership set-aside programs other than a mortgage refinancing program established under paragraph (f) of this section, at least one-third of the Bank’s aggregate annual set-aside allocation to such programs shall be to assist first-time homebuyers. * * * * * ■ 8. Amend § 1291.6 by adding paragraph (f) to read as follows: § 1291.6 Homeownership set-aside programs. jlentini on PROD1PC65 with RULES * * * * * (f) Mortgage refinancing program—(1) General. A Bank may establish a homeownership set-aside program for the use of AHP direct subsidy by its members to assist in the refinancing of a household’s mortgage loan, provided such program meets the requirements of this paragraph (f) and otherwise meets the requirements of part 1291. The provisions of paragraphs (c)(2)(ii), (c)(2)(iii), and (c)(4) through (c)(8) of this section, shall not apply to such program. (2) Eligible loans. A loan is eligible to be refinanced with AHP direct subsidy if the loan is secured by a first mortgage on an owner-occupied unit that is the primary residence of the household, and the loan is refinanced under the Federal Housing Administration’s (FHA) HOPE for Homeowners Program established pursuant to Title IV of the Housing and Economic Recovery Act of 2008 and thereby meets all applicable underwriting requirements and other standards under Title II of the National Housing Act, as amended by Title IV (12 U.S.C. 1707 et seq.). (3) Eligible uses of AHP direct subsidy. Members may provide the AHP direct subsidy to: (i) Reduce the outstanding principal balance of the loan below the maximum loan-to-value ratio required under the HOPE for Homeowners Program in order to make the refinanced loan affordable to the household by enabling VerDate Aug<31>2005 17:16 Oct 16, 2008 Jkt 217001 the household to meet the HOPE for Homeowners Program’s debt-to-income standards for a low-or moderate-income household; or (ii) Pay FHA-approved loan closing costs. (4) Eligible lender participants. A Bank may provide the AHP direct subsidy to members that are FHAapproved lenders for the purpose of refinancing an eligible loan with an FHA-insured loan by the member, or, in the Bank’s discretion, to members that provide the subsidy to FHA-approved lenders that are not members of the Bank for the purpose of refinancing an eligible loan if, after consulting with the Bank’s Advisory Council, the Bank determines that such action would be in the best interests of borrowers in the Bank’s district. (5) Sunset. (i) This paragraph (f) shall expire on July 30, 2010, and a Bank may not commit AHP subsidy to households under its refinancing program after such date. (ii) A lender may use the AHP subsidy committed by such date for a loan submitted to the FHA for approval on or before July 30, 2010 that is approved for refinancing under the HOPE for Homeowners Program after such date. ■ 9. Amend § 1291.7 by: ■ a. In paragraph (b)(1)(ii), adding ‘‘and § 1291.6(f)’’ after ‘‘§ 1291.6(c)’’; and ■ b. In paragraph (b)(2)(i), adding ‘‘and § 1291.6(f)’’ after ‘‘§ 1291.6(c)’’. ■ 10. In newly redesignated § 1291.11, revise all references to ‘‘Board of Directors’’ to read ‘‘Director’’. Dated: October 7, 2008. James B. Lockhart III, Director, Federal Housing Finance Agency. [FR Doc. E8–24320 Filed 10–16–08; 8:45 am] BILLING CODE 8070–01–P SMALL BUSINESS ADMINISTRATION 13 CFR Part 101 RIN 3245–AF75 Small Business Energy Efficiency Program Small Business Administration. Direct final rule; comment AGENCY: ACTION: request. SUMMARY: The U.S. Small Business Administration (SBA or Administration) is establishing a government-wide program that builds on the Energy Star for Small Business Program, and is located at http://www.sba.gov/energy. This rule is promulgated to comply with a provision of the Energy Independence and Security Act of 2007. PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 61665 This rule is effective December 1, 2008, without further action, unless SBA receives a significant adverse comment by November 17, 2008. If SBA receives any significant adverse comments, SBA will publish a timely withdrawal of this rule in the Federal Register. ADDRESSES: You may submit comments, identified by RIN: 3245–AF75, by any of the following methods: • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting documents. • Mail, for paper, disk, or CD–ROM submissions: Kathryn Holt, Analyst, Office of Policy and Strategic Planning, Office of the Administrator, 409 Third Street, SW., Mail Code 2150, Washington, DC 20416. • Hand Delivery/Courier: Kathryn Holt, Analyst, Office of Policy and Strategic Planning, Office of the Administrator, 409 Third Street, SW., Mail Stop 2150, Washington, DC 20416. SBA will post all comments on http://www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at http://www.regulations.gov, please submit the information to Kathryn Holt, Analyst, Office of Policy and Strategic Planning, Office of the Administrator, 409 Third Street, SW., Mail Stop 2150, Washington, DC 20416, or send an e-mail to kathryn.holt@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make its final determination of whether it will publish the information or not. FOR FURTHER INFORMATION CONTACT: Kathryn Holt, Analyst, Office of Policy and Strategic Planning, Office of the Administrator, 409 Third Street, SW., Mail Stop 2150, Washington, DC 20416 or kathryn.holt@sba.gov. SUPPLEMENTARY INFORMATION: The Administration has developed and coordinated a Government-wide program, building on the Energy Star for Small Business Program, to assist small business concerns in: Becoming more energy efficient, understanding the cost savings from improved energy efficiency, and identifying financing options for energy efficiency upgrades. This rule is promulgated to comply with the Energy Independence and Security Act of 2007, § 1203(b). (15 U.S.C. 657h). The program was developed and coordinated in consultation with the Secretary of the Department of Energy and the Administrator of the Environmental Protection Agency, and DATES: E:\FR\FM\17OCR1.SGM 17OCR1

Agencies

[Federal Register Volume 73, Number 202 (Friday, October 17, 2008)]
[Rules and Regulations]
[Pages 61660-61665]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-24320]


=======================================================================
-----------------------------------------------------------------------

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 951

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1291

RIN 2590-AA04


Affordable Housing Program Amendments: Federal Home Loan Bank 
Mortgage Refinancing Authority

AGENCY: Federal Housing Finance Agency.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing and 
seeking comment on an interim final rule to implement section 1218 of 
the Housing and Economic Recovery Act of 2008 (Recovery Act), which 
requires the FHFA to allow the Federal Home Loan Banks (Banks) until 
July 30, 2010, to use Affordable Housing Program (AHP) homeownership 
set-aside funds to refinance low- or moderate-income households' 
mortgage loans. This rulemaking relocates the AHP regulation to the 
FHFA rules, and adds new provisions that allow the Banks to use AHP 
set-aside funds to provide direct subsidies to low- or moderate-income 
households who qualify for refinancing assistance under the HOPE for 
Homeowners Program established by the Federal Housing Administration 
(FHA) under Title IV of the Recovery Act.

ADDRESSES: This interim final rule is effective October 17, 2008. The 
FHFA will accept written comments on the interim final rule on or 
before December 16, 2008.
    Comments: Submit comments to the FHFA using any one of the 
following methods:
    E-mail: comments@fhfb.gov. Please include RIN 2590-AA04 in the 
subject line of the message.
    Fax: 202-408-2580.
    Mail/Hand Delivery: Federal Housing Finance Board, 1625 Eye Street, 
NW., Washington, DC 20006, Attention: Public Comments/RIN 2590-AA04.
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments. If you submit your comment to the 
Federal eRulemaking Portal, please also send it by e-mail to the FHFA 
at comments@fhfb.gov to ensure timely receipt by the agency. Include 
the following information in the subject line of your submission: 
Federal Housing Finance Agency. Interim Final Rule: Affordable Housing 
Program Amendments: Federal Home Loan Bank Mortgage Refinancing 
Authority. RIN 2590-AA04.
    We will post all public comments we receive without change, 
including any personal information you provide, such as your name and 
address, on the FHFA Web site at http://www.fhfb.gov/
Default.aspx?Page=93&Top=93.

FOR FURTHER INFORMATION CONTACT: Sylvia Martinez, Senior Policy 
Analyst, 202-408-2825, martinezs@fhfb.gov; or Amy Bogdon, Senior 
Advisor, 202-408-2546, bogdona@fhfb.gov. For legal questions: Sharon B. 
Like, Senior Attorney-Advisor, 202-408-2930, likes@fhfb.gov. You can 
send regular mail to the Federal Housing Finance Board, 1625 Eye 
Street, NW., Washington, DC 20006.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Federal Housing Finance Regulatory Reform Act of 2008

    Effective July 30, 2008, Division A of the Housing and Economic 
Recovery Act of 2008, Public Law No. 110-289, 122 Stat. 2654 (2008), 
titled the Federal Housing Finance Regulatory Reform Act of 2008 
(Reform Act), created the Federal Housing Finance Agency (FHFA) as an 
independent agency of the federal government. The Reform Act

[[Page 61661]]

transferred the supervisory and oversight responsibilities over the 
Federal National Mortgage Association (Fannie Mae), Federal Home Loan 
Mortgage Corporation (Freddie Mac) (collectively, Enterprises), the 
Federal Home Loan Banks (Banks), and the Bank System's Office of 
Finance, from the Office of Federal Housing Enterprise Oversight 
(OFHEO) and the Federal Housing Finance Board (FHFB) to the FHFA. The 
Reform Act provides for the abolishment of OFHEO and the FHFB one year 
after the date of enactment. The FHFA is responsible for ensuring that 
the Enterprises and the Banks operate in a safe and sound manner, 
including being capitalized adequately, and carry out their public 
policy missions, including fostering liquid, efficient, competitive, 
and resilient national housing finance markets.
    The Enterprises and the Banks continue to operate under regulations 
promulgated by OFHEO and the FHFB until the FHFA issues its own 
regulations.

B. The Banks' Affordable Housing Program

    Section 10(j) of the Federal Home Loan Bank Act (Bank Act) requires 
each Bank to establish an affordable housing program, the purpose of 
which is to enable a Bank's members to finance homeownership by 
households with incomes at or below 80 percent of the area median 
income (low- or moderate-income households), and to finance the 
purchase, construction, or rehabilitation of rental projects in which 
at least 20 percent of the units will be occupied by and affordable for 
households earning 50 percent or less of the area median income (very 
low-income households). See 12 U.S.C. 1430(j)(1) and (2). The Bank Act 
requires each Bank to contribute 10 percent of its previous year's net 
earnings to its AHP annually, subject to a minimum annual combined 
contribution by the 12 Banks of $100 million. See 12 U.S.C. 
1430(j)(5)(C). Section 1218 of the Reform Act amended section 10(j) by 
adding a new paragraph (2)(C) that requires the FHFA to allow the Banks 
until July 30, 2010, to use AHP homeownership set-aside funds to 
refinance low- or moderate-income households' first mortgage loans on 
their primary residences. See 12 U.S.C. 1430(j)(2)(C). The Director of 
the FHFA must establish the percentage of set-aside funds eligible for 
this use by regulation.
    The FHFB regulation implementing the AHP provisions of the Bank 
Act, previously codified at 12 CFR part 951, is relocated by this 
rulemaking to part 1291. The following discussion uses the new 
numbering references. Among other things,\1\ the AHP regulation 
authorizes a Bank, in its discretion, to set aside a portion of its 
annual required AHP contribution to establish homeownership set-aside 
programs for the purpose of promoting homeownership for low- or 
moderate-income households. See 12 CFR 1291.6. Under the homeownership 
set-aside programs, a Bank may provide AHP direct subsidy (grants) to 
members to pay for down payment assistance, closing costs, and 
counseling costs in connection with a household's purchase of its 
primary residence, and for rehabilitation assistance in connection with 
a household's rehabilitation of an owner-occupied residence. See 12 CFR 
1291.6(c)(4). The AHP regulation does not authorize the Banks to use 
AHP set-aside funds for refinancing of mortgages. Currently, a Bank may 
allocate up to the greater of $4.5 million or 35 percent of its annual 
required AHP contribution to homeownership set-aside programs in that 
year, provided that at least one-third of the Bank's annual set-aside 
allocation is targeted to first-time homebuyers. See 12 CFR 
1291.2(b)(2)(i).
---------------------------------------------------------------------------

    \1\ In addition to the discretionary set-aside authority, the 
AHP regulation requires that each Bank establish a competitive 
application program under which the Bank's members may apply for AHP 
subsidies pursuant to eligibility requirements and scoring criteria 
set forth in the regulation and implemented through Bank policies. 
See 12 CFR 1291.5.
---------------------------------------------------------------------------

    In January 2008, the FHFB waived certain provisions of the AHP 
homeownership set-aside program rule to allow the Federal Home Loan 
Bank of San Francisco (San Francisco Bank) to establish a temporary 
pilot program to provide AHP direct subsidy to enable a household with 
a subprime or nontraditional loan held by a San Francisco Bank member 
or its affiliate to refinance or restructure the loan into an 
affordable, long-term fixed-rate mortgage. See FHFB Resolution 2008-01 
(Jan. 15, 2008). The authority will expire on December 31, 2009. In 
April 2008, the FHFB published a proposed rule that would have 
temporarily extended the authority to use set-aside funds for mortgage 
refinancing or restructuring to all of the Banks. See 73 FR 20552 (Apr. 
16, 2008). The FHFB received 36 comments on the proposal. Commenters 
who supported use of AHP funds for refinancing suggested flexibility in 
the rules governing use of the funds so the Banks and their members 
would be able to assist a greater number of borrowers in distress, 
including allowing use of AHP set-aside funds in conjunction with other 
federal, state or local mortgage refinancing programs.
    Before the FHFB took final action on the proposed amendments to the 
AHP rule, the Reform Act added section 10(j)(2)(C) to the Bank Act. 
Title IV of the Recovery Act also required establishment by the FHA of 
the HOPE for Homeowners Program, a temporary program expected to be 
implemented by October 1, 2008, and which will expire on September 30, 
2011. Participation in the HOPE for Homeowners Program is voluntary on 
the part of homeowners and existing loan holders. Under the HOPE for 
Homeowners Program, FHA-approved lenders may refinance loans that will 
qualify for FHA insurance if the amount of the loan is reduced to no 
more than 90 percent of the currently appraised value of the owner-
occupied property. The FHA insurance premium, which equals 3 percent of 
the remaining principal, is deducted upfront. The borrower will pay an 
annual premium of 1.5 percent of the outstanding mortgage amount.
    The purpose of the HOPE for Homeowners Program, like that of the 
Banks' refinancing authority under the AHP, is to assist distressed 
homeowners and support long-term affordable homeownership. The FHFA 
believes that use of AHP subsidy in conjunction with the HOPE for 
Homeowners Program will leverage and enhance the effectiveness of each 
program, ensure that the full range of federal assistance to affected 
homeowners is available quickly, and provide the flexibility that the 
Banks and their members need to make the AHP refinancing program 
successful. In adopting this approach, the FHFA has consulted with the 
FHA. Linking the use of the AHP subsidy to refinancing under the HOPE 
for Homeowners Program also would be consistent with the requirement in 
section 10(j)(9)(G) of the Bank Act that the AHP rule coordinate AHP 
activities with other federal or federally-subsidized affordable 
housing activities to the maximum extent possible. See 12 U.S.C. 
1430(j)(9)(G). Accordingly, this interim final rule authorizes a Bank, 
in its discretion, to temporarily establish a homeownership set-aside 
program for the use of AHP direct subsidy by its members to assist in 
the refinancing of a household's mortgage loan under the FHA's HOPE for 
Homeowners Program.
    Section 1201 of the Reform Act requires the Director of the FHFA to 
consider the differences between the Banks and the Enterprises in 
rulemakings that affect the Banks with respect to the Banks' 
cooperative ownership structure, mission of providing liquidity to 
members, affordable housing and community development mission, capital 
structure,

[[Page 61662]]

and joint and several liability. 12 U.S.C. 4513(f). In preparing the 
interim final rule, the Director considered these factors and 
determined that the rule is appropriate, particularly because the AHP 
regulation implements a statutory provision of the Bank Act that 
applies only to the Banks. See 12 U.S.C. 1430(j).

II. Analysis of the Interim Final Rule

A. Relocation of AHP Rule to Part 1291

    The interim final rule relocates the AHP rule from part 951 of the 
FHFB regulations to part 1291 of the FHFA regulations, and renames the 
new part to read ``Federal Home Loan Banks' Affordable Housing 
Program''. The rule also renumbers references within the rule to 
reflect its new part number.

B. Authority To Establish Mortgage Refinancing Program: Sec.  
1291.6(f)(1)

    The interim final rule adds a new paragraph (f) under the existing 
AHP homeownership set-aside program provisions of Sec.  1291.6 of the 
AHP regulation, that authorizes a Bank, in its discretion, to 
temporarily establish a homeownership set-aside program for the use of 
AHP direct subsidy by its members to assist in the refinancing of a 
household's mortgage loan under FHA's HOPE for Homeowners Program. 12 
CFR 1291.6(f). As a general proposition, any such new refinancing 
program must comply with the existing requirements in Sec.  1291.6, 
except for certain specified provisions, as well as with the 
requirements of part 1291. Thus, the existing provisions in Sec.  
1291.6 governing eligible member applicants, member allocation 
criteria, household income eligibility, maximum subsidy per household 
limit of $15,000, de minimis cash backs, application approvals, funding 
procedures, reservation of subsidies, and progress towards use of the 
subsidy, all apply to a Bank's mortgage refinancing program. See 12 CFR 
1291.6(b), (c)(1), (c)(2)(i), (c)(3), (c)(9), (d), (e). Similarly, a 
Bank's mortgage refinancing program must otherwise meet the 
requirements of part 1291, including the monitoring, remedial actions 
for member noncompliance, and agreements provisions in Sec. Sec.  
1291.7, 1291.8, and 1291.9, respectively, other than the requirement in 
Sec.  1291.9(a)(7) for five-year retention agreements in connection 
with a household's subsequent sale or refinancing of the unit.
    The interim final rule provides that the provisions in Sec.  1291.6 
governing household completion of a counseling program, first-time 
homebuyer and additional discretionary household eligibility criteria, 
eligible uses of AHP subsidy, five-year retention agreements, lender 
financial or other concessions, loan financing costs, and counseling 
costs requirements, all do not apply to the new refinancing programs. 
See 12 CFR 1291.6(c)(2)(ii), (c)(2)(iii), (c)(4)-(c)(8).

C. Funding Allocation: Sec.  1291.2(b)(2)(i)

    In order to maximize the Banks' role in responding to the current 
national mortgage crisis, the interim final rule allows a Bank to 
allocate the maximum permissible homeownership set-aside allocation 
entirely to a mortgage refinancing program established under new 
paragraph (f). See 12 CFR 1291.2(b)(2)(i). The interim final rule 
further provides that if a Bank sets aside funds solely for 
homeownership set-aside programs other than a mortgage refinancing 
program established under paragraph (f), at least one-third of the 
Bank's aggregate annual set-aside allocation to such programs shall be 
to assist first-time homebuyers. This is consistent with the current 
one-third first-time homebuyers requirement.

D. Eligible Loans: Sec.  1291.6(f)(2)

    Under the interim final rule, a loan is eligible to be refinanced 
with AHP direct subsidy if the loan is secured by a first mortgage on 
an owner-occupied unit that is the primary residence of the household, 
and the loan is refinanced under the HOPE for Homeowners Program. 12 
CFR 1291.6(f)(2). In order to be refinanced under the HOPE for 
Homeowners Program, the loan must meet all applicable underwriting 
requirements and other FHA standards for the HOPE for Homeowners 
Program. The FHFA believes that these requirements and standards will 
provide both adequate protections to borrowers whose loans will be 
refinanced and protect the integrity of the AHP. For example, under the 
HOPE for Homeowners Program and FHA standards:
     The borrower must be unable to afford its existing 
mortgage payments; the borrower's mortgage debt-to-income ratio, as of 
March 1, 2008, must have been greater than 31 percent, or such higher 
amount as the FHA determines appropriate;
     The principal amount of the refinanced loan shall not 
exceed 90 percent of the currently appraised value of the property;
     The refinanced loan must be a fixed-rate, fully 
amortizing, 30-year loan;
     Prepayment fees must be waived;
     All fees and penalties related to default or delinquency 
on the original mortgage must be waived or forgiven;
     Any outstanding mortgage liens on the property shall be 
removed;
     Investor-owned properties are not eligible--the borrower 
must be an owner-occupant;
     The borrower must have verified income based on an IRS tax 
return or other equivalent standards;
     The borrower may be charged only reasonable and customary 
closing costs established by the FHA;
     Origination fees are subject to limitation; and
     Rates on refinanced mortgages must be commensurate with 
market interest rates.
    There are other programs that provide refinancing assistance to 
distressed borrowers. The Enterprises offer programs that allow for 
loan modifications targeted at subprime mortgage borrowers but which do 
not require that lenders take an initial write-down based on the 
current appraised value. The FHA offers a refinancing option in 
addition to the HOPE for Homeowners Program called FHA Secure. Under 
FHA Secure, any mortgage payment arrearage on the first loan can be 
rolled into a new FHA-insured loan. Further, lenders have the option of 
placing a second lien on the property if the borrower owes more than 
the property is worth or exceeds the FHA loan limit or to cover 
prepayment penalties and arrearages. In addition, state housing finance 
agencies are developing their own refinancing programs to assist 
distressed homeowners. Because these programs are diverse and emerging, 
the FHFA has not analyzed their specific merits.
    The FHFA requests comment on whether the rule should authorize the 
Banks to use AHP set-aside funds to assist homeowners refinancing under 
other programs intended to aid distressed homeowners, such as those 
offered by the Enterprises, FHA Secure, or any state housing finance 
agency programs. In addition, the FHFA requests comment on how the 
standards for these programs will assure the affordability of the 
housing costs to the borrower and the sustainability of the refinanced 
loan.

E. Eligible Uses of AHP Subsidy: Sec.  1291.6(f)(3)

    The interim final rule allows members to provide AHP direct subsidy 
for two uses. 12 CFR 1291.6(f)(3). A member may use the subsidy to 
reduce the outstanding principal balance of the household's loan below 
the maximum loan-to-value ratio required under the HOPE for Homeowners 
Program in order to enable the household to meet the applicable 
mortgage debt-to-income

[[Page 61663]]

ratio requirements under such Program, i.e., to make the refinanced 
loan affordable to the household. This use of the AHP subsidy is 
consistent with the current AHP rule, which permits use of the AHP 
subsidy to pay for down payment assistance in connection with the 
purchase of a home under the homeownership set-aside program. See 12 
CFR 1291.6(c)(4). In addition, under the new AHP refinancing authority, 
a member may use the AHP subsidy to pay FHA-approved loan closing 
costs. This use of AHP subsidy also is consistent with the current AHP 
rule, which permits use of the AHP subsidy to pay for closing costs in 
connection with the purchase of a home under the homeownership set-
aside program. See 12 CFR 1291.6(c)(4) and (8).

F. Eligible Lender Participants: Sec.  1291.6(f)(4)

    Under the interim final rule, a Bank may provide the AHP direct 
subsidy to members that are FHA-approved lenders for the purpose of 
refinancing an eligible loan with an FHA-insured loan by the member. A 
Bank may also, in its discretion, provide the AHP subsidy to members 
that will provide the subsidy to FHA-approved lenders that are not 
members of the Bank for the purpose of refinancing an eligible loan if, 
after consulting with the Bank's Advisory Council, the Bank determines 
that such action would be in the best interests of borrowers in the 
Bank's district. 12 CFR 1291.6(f)(4). Providing the subsidy to members, 
or to members who provide it to nonmembers, is consistent with the 
current AHP homeownership set-aside process under which a Bank provides 
the AHP subsidy to a member for use in conjunction with making a loan 
to a borrower, or to a member that provides the subsidy to another 
member or nonmember lender to make an AHP-assisted loan to a borrower.

G. AHP Retention Agreements

    The interim final rule does not require five-year retention 
agreements as required under the current AHP regulation and, therefore, 
does not require repayment of AHP subsidy by a household in the event 
of a subsequent sale or refinancing of the unit during the five-year 
retention period. See 12 CFR 1291.6(c)(5) and 1291.9(a)(7). The FHFA 
has decided not to include this requirement because the HOPE for 
Homeowners Program includes a requirement generally that any 
appreciation or equity created as a result of a sale or refinancing 
during the five-year period must be shared between the FHA, the 
borrower, and any subordinate mortgage holder whose lien was 
extinguished as part of the refinancing under the Program. See Reform 
Act at sec. 1402(a) (National Housing Act sec. 257(e)(4)(B), and (k)).

H. Monitoring: Sec.  1291.7(b)

    The interim final rule amends existing Sec.  1291.7(b), which sets 
forth the monitoring requirements for homeownership set-aside programs 
generally, to make a Bank's mortgage refinancing program subject to 
those monitoring requirements. Thus, a Bank's written monitoring 
policies for its homeownership set-aside programs must include 
requirements for: (i) Determining whether AHP subsidy was provided to 
households with incomes at or below 80 percent of the area median 
income as required in Sec.  1291.6(c)(2)(i), and all other applicable 
eligibility requirements in Sec.  1291.6(c) and (f); (ii) Bank review 
of member certifications, prior to disbursement of the AHP subsidy, 
that the subsidy will be provided in compliance with all applicable 
eligibility requirements in Sec.  1291.6(c) and (f); and (iii) Bank 
review of back-up documentation regarding household incomes maintained 
by the member, and maintenance and Bank review of other documentation 
in the Bank's discretion.

I. Sunset Date: Sec.  1291.6(f)(5)

    The interim final rule includes a provision terminating the Banks' 
authority to commit AHP subsidy for refinancing after July 30, 2010, 
which is the expiration date of the two-year period in section 1218 of 
the Reform Act. 12 CFR 1291.6(f)(5). The rule allows lenders to use AHP 
subsidy committed by that date to refinance loans that are in the 
pipeline. This means that a lender may use the AHP subsidy for a loan 
that was submitted to the FHA for approval on or before July 30, 2010 
that is approved for refinancing under the HOPE for Homeowners Program 
after that date. Title IV of the Reform Act provides that the sunset 
date for the HOPE for Homeowners Program is September 30, 2011. See 
Reform Act at sec. 1402(a) (National Housing Act sec. 257(r)). In light 
of our view that prior to its amendment by the Reform Act, section 
10(j) of the Bank Act provided the legal authority for the FHFA to 
permit the Banks to use AHP subsidy to pay costs associated with 
refinancing existing mortgage loans, see 73 FR at 20553-55, the FHFA 
requests comment on whether it should extend the sunset date to be co-
extensive with that of the HOPE for Homeowners Program.
    The FHFA invites comments on all aspects of the interim final rule.

III. Notice and Public Participation

    The FHFA for good cause finds that the notice and comment procedure 
required by the Administrative Procedure Act is impracticable or 
contrary to the public interest in this instance. See 5 U.S.C. 
553(b)(3)(B). Section 1218 of the Reform Act requires that the FHFA's 
regulations authorize the use of AHP subsidy for mortgage refinancing 
for a two-year period commencing on July 30, 2008. Issuance of an 
interim final rule will enable the Banks to expedite implementation of 
AHP mortgage refinancing programs pursuant to section 1218. The delay 
that would ensue during a proposed notice and comment rulemaking would 
significantly curtail the available period of time for implementation 
and operation of AHP mortgage refinancing programs by the Banks. 
However, because the FHFA believes that public comments are valuable, 
it encourages comments on this interim final rule, and will consider 
all comments received on or before December 16, 2008 in promulgating a 
final rule.

IV. Effective Date

    For the reasons stated in part III above, the FHFA for good cause 
finds that the interim final rule should become effective on October 
17, 2008. See 5 U.S.C. 553(d)(3).

V. Paperwork Reduction Act

    The information collection contained in the current AHP regulation, 
entitled ``Affordable Housing Program (AHP),'' has been assigned 
control number 3069-0006 by the Office of Management and Budget (OMB). 
The interim final rule does not substantively or materially modify the 
approved information collection. Consequently, the FHFA has not 
submitted any information to OMB for review under the Paperwork 
Reduction Act of 1995 (PRA). See 44 U.S.C. 3501 et seq.

VI. Regulatory Flexibility Act

    The FHFA is adopting this regulation in the form of an interim 
final rule and not as a proposed rule. Therefore, the provisions of the 
Regulatory Flexibility Act do not apply. See 5 U.S.C. 601(2) and 
603(a).

List of Subjects in 12 CFR Parts 951 and 1291

    Community development, Credit, Federal home loan banks, Housing, 
Reporting and recordkeeping requirements.


0
For the reasons stated in the preamble, the FHFA hereby amends chapters 
IX

[[Page 61664]]

and XII of title 12 of the Code of Federal Regulations as follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

0
1. Amend title 12 CFR chapter XII by establishing subchapter E, 
consisting of parts 1280 through 1299, to read as follows:

Subchapter E--Housing Goals and Mission

CHAPTER IX--FEDERAL HOUSING FINANCE BOARD

PART 951--AFFORDABLE HOUSING PROGRAM

0
2. Transfer 12 CFR part 951 from chapter IX, subchapter G, to chapter 
XII, subchapter E and redesignate as 12 CFR part 1291.

PART 1291--FEDERAL HOME LOAN BANKS' AFFORDABLE HOUSING PROGRAM


0
3. The authority citation for the newly redesignated part 1291 
continues to read as follows:

    Authority: 12 U.S.C. 1430(j).


0
3A. Revise the heading of newly redesignated part 1291 to read as set 
forth above.

0
4. Amend the newly redesignated part 1291 as follows:

----------------------------------------------------------------------------------------------------------------
                                    By removing the reference
              Amend:                           to:                          And adding in its place:
----------------------------------------------------------------------------------------------------------------
Sec.   1291.1, definition of        Sec.   951.1 of this part  Sec.   1291.1.
 ``Affordable''.
Sec.   1291.1, definition of        Sec.   951.5 of this part  Sec.   1291.5.
 ``Competitive application
 program''.
Sec.   1291.1, definition of        Sec.   951.6 of this part  Sec.   1291.6.
 ``Homeownership set-aside
 program''.
Sec.   1291.3(a)(1)...............  Sec.   951.1 of this part  Sec.   1291.1.
Sec.   1291.3(a)(2)...............  Sec.   951.5 of this part  Sec.   1291.5.
Sec.   1291.3(a)(3)...............  Sec.   951.6 of this part  Sec.   1291.6.
Sec.   1291.3(a)(4)...............  Sec.   951.5(c)(13) of     Sec.   1291.5(c)(13).
                                     this part.
Sec.   1291.3(a)(5)...............  Sec.   951.5(c)(14) of     Sec.   1291.5(c)(14).
                                     this part.
Sec.   1291.3(a)(6)...............  Sec.   951.7 of this part  Sec.   1291.7.
Sec.   1291.3(a)(7)...............  Sec.   951.8(f)(2) of      Sec.   1291.8(f)(2).
                                     this part.
Sec.   1291.3(a)(8)...............  Sec.   951.9(a)(7) and     Sec.   1291.9(a)(7) and (8).
                                     (a)(8) of this part.
Sec.   1291.5(c)(9)(i)............  Sec.   951.9(a)(7) of      Sec.   1291.9(a)(7).
                                     this part.
Sec.   1291.5(c)(9)(ii)...........  Sec.   951.9(a)(8) of      Sec.   1291.9(a)(8).
                                     this part.
Sec.   1291.5(c)(10)(ii)..........  Sec.   951.5(c)(13) of     paragraph (c)(13) of this section.
                                     this part.
Sec.   1291.5(c)(10)(iii).........  Sec.   951.5(c)(14) of     paragraph (c)(14) of this section.
                                     this part.
Sec.   1291.5(c)(13)(iii)(A)......  Sec.  Sec.   951.7(a) and  Sec.  Sec.   1291.7(a) and 1291.9.
                                     951.9 of this part.
Sec.   1291.5(c)(13)(iii)(B)......  Sec.  Sec.   951.8 and     Sec.  Sec.   1291.8 and 1291.9.
                                     951.9 of this part.
Sec.   1291.5(c)(14)(iii).........  Sec.   951.7(a), 951.8,    Sec.  Sec.   1291.7(a), 1291.8, and 1291.9.
                                     and 951.9, respectively,
                                     of this part.
Sec.   1291.5(c)(16)(i)(A)........  Sec.   951.5(f) of this    paragraph (f) of this section.
                                     part.
Sec.   1291.5(g)(6)...............  Sec.   951.8(f)(2) of      Sec.   1291.8(f)(2).
                                     this part.
Sec.   1291.5(h)(1)(i)............  Sec.   951.3 of this part  Sec.   1291.3.
Sec.   1291.5(h)(1)(ii)...........  Sec.   951.5(e) of this    paragraph (e) of this section.
                                     part.
Sec.   1291.6(c)(2)(iii)..........  Sec.   951.2(b)(2) of      Sec.   1291.2(b)(2).
                                     this part.
Sec.   1291.6(c)(5)...............  Sec.   951.9(a)(7) of      Sec.   1291.9(a)(7).
                                     this part.
Sec.   1291.7(a)(1)(i)(C)(4)......  Sec.   951.9(a)(7) or      Sec.   1291.9(a)(7) or (8).
                                     (a)(8), respectively, of
                                     this part.
Sec.   1291.7(a)(5)...............  Sec.   951.1 of this part  Sec.   1291.1.
Sec.   1291.7(b)(1)(i)............  Sec.   951.6(c)(2) of      Sec.   1291.6(c)(2).
                                     this part.
Sec.   1291.7(b)(1)(ii)...........  Sec.   951.6(c) of this    Sec.   1291.6(c).
                                     part.
Sec.   1291.7(b)(1)(ii)...........  Sec.   951.6(c)(5) of      Sec.   1291.6(c)(5).
                                     this part.
Sec.   1291.7(b)(2)(i)............  Sec.   951.6(c) of this    Sec.   1291.6(c).
                                     part.
Sec.   1291.8(c)(2)...............  Sec.   951.5(f) of this    Sec.   1291.5(f).
                                     part.
Sec.   1291.8(i)..................  Sec.   907.9 of this       12 CFR 907.9.
                                     chapter.
Sec.   1291.9(a)(4)(i)............  Sec.   951.8(b)(1) of      Sec.   1291.8(b)(1).
                                     this part.
Sec.   1291.9(a)(4)(ii)(A)........  Sec.   951.8(b)(2)(i) or   Sec.   1291.8(b)(2)(i) or (ii).
                                     (b)(2)(ii) of this part.
Sec.   1291.9(a)(4)(ii)(B)........  Sec.   951.8(b)(2)(i) of   Sec.   1291.8(b)(2)(i).
                                     this part.
Sec.   1291.9(a)(5)(i)............  Sec.   951.7 of this part  Sec.   1291.7.
Sec.   1291.9(a)(5)(ii)...........  Sec.   951.7 of this part  Sec.   1291.7.
Sec.   1291.9(a)(7)(iii)(A).......  Sec.   951.8(f)(2) of      Sec.   1291.8(f)(2).
                                     this part.
Sec.   1291.9(a)(7)(iii)(B).......  Sec.   951.8(f)(2).......  Sec.   1291.8(f)(2).
Sec.   1291.9(a)(9)...............  Sec.   951.5(c)(13) of     Sec.   1291.5(c)(13).
                                     this part.
Sec.   1291.9(b)..................  Sec.   951.8(b)(2)(ii) of  Sec.   1291.8(b)(2)(ii).
                                     this part.
Sec.   1291.11(a).................  Sec.   951.2(a) of this    Sec.   1291.2(a).
                                     part.
Sec.   1291.12(a).................  Sec.   951.2(a) of this    Sec.   1291.2(a).
                                     part.
Sec.   1291.12(b).................  Sec.   951.2(a) of this    Sec.   1291.2(a).
                                     part.
----------------------------------------------------------------------------------------------------------------


0
5. In newly redesignated part 1291, revise all references to ``Finance 
Board'' to read ``FHFA''.

0
6. In newly redesignated Sec.  1291.1, add the following definitions in 
alphabetical order:


Sec.  1291.1  Definitions.

* * * * *
    Director means the Director of the Federal Housing Finance Agency, 
or his or her designate.
* * * * *
    FHFA means the Federal Housing Finance Agency.
* * * * *>

0
7. Amend Sec.  1291.2(b)(2)(i) to read as follows:

[[Page 61665]]

Sec.  1291.2  Required annual AHP contributions; allocation of 
contributions.

* * * * *
    (b) * * *
    (2) Homeownership set-aside programs--(i) Allocation amount; first-
time homebuyers. (A) A Bank, in its discretion, may set aside annually, 
in the aggregate, up to the greater of $4.5 million or 35 percent of 
the Bank's annual required AHP contribution to provide funds to members 
participating in homeownership set-aside programs, including a mortgage 
refinancing set-aside program established under paragraph (f) of this 
section, pursuant to the requirements of this part.
    (B) If a Bank sets aside funds solely for homeownership set-aside 
programs other than a mortgage refinancing program established under 
paragraph (f) of this section, at least one-third of the Bank's 
aggregate annual set-aside allocation to such programs shall be to 
assist first-time homebuyers.
* * * * *

0
8. Amend Sec.  1291.6 by adding paragraph (f) to read as follows:


Sec.  1291.6  Homeownership set-aside programs.

* * * * *
    (f) Mortgage refinancing program--(1) General. A Bank may establish 
a homeownership set-aside program for the use of AHP direct subsidy by 
its members to assist in the refinancing of a household's mortgage 
loan, provided such program meets the requirements of this paragraph 
(f) and otherwise meets the requirements of part 1291. The provisions 
of paragraphs (c)(2)(ii), (c)(2)(iii), and (c)(4) through (c)(8) of 
this section, shall not apply to such program.
    (2) Eligible loans. A loan is eligible to be refinanced with AHP 
direct subsidy if the loan is secured by a first mortgage on an owner-
occupied unit that is the primary residence of the household, and the 
loan is refinanced under the Federal Housing Administration's (FHA) 
HOPE for Homeowners Program established pursuant to Title IV of the 
Housing and Economic Recovery Act of 2008 and thereby meets all 
applicable underwriting requirements and other standards under Title II 
of the National Housing Act, as amended by Title IV (12 U.S.C. 1707 et 
seq.).
    (3) Eligible uses of AHP direct subsidy. Members may provide the 
AHP direct subsidy to:
    (i) Reduce the outstanding principal balance of the loan below the 
maximum loan-to-value ratio required under the HOPE for Homeowners 
Program in order to make the refinanced loan affordable to the 
household by enabling the household to meet the HOPE for Homeowners 
Program's debt-to-income standards for a low-or moderate-income 
household; or
    (ii) Pay FHA-approved loan closing costs.
    (4) Eligible lender participants. A Bank may provide the AHP direct 
subsidy to members that are FHA-approved lenders for the purpose of 
refinancing an eligible loan with an FHA-insured loan by the member, 
or, in the Bank's discretion, to members that provide the subsidy to 
FHA-approved lenders that are not members of the Bank for the purpose 
of refinancing an eligible loan if, after consulting with the Bank's 
Advisory Council, the Bank determines that such action would be in the 
best interests of borrowers in the Bank's district.
    (5) Sunset. (i) This paragraph (f) shall expire on July 30, 2010, 
and a Bank may not commit AHP subsidy to households under its 
refinancing program after such date.
    (ii) A lender may use the AHP subsidy committed by such date for a 
loan submitted to the FHA for approval on or before July 30, 2010 that 
is approved for refinancing under the HOPE for Homeowners Program after 
such date.

0
9. Amend Sec.  1291.7 by:
0
a. In paragraph (b)(1)(ii), adding ``and Sec.  1291.6(f)'' after 
``Sec.  1291.6(c)''; and
0
b. In paragraph (b)(2)(i), adding ``and Sec.  1291.6(f)'' after ``Sec.  
1291.6(c)''.

0
10. In newly redesignated Sec.  1291.11, revise all references to 
``Board of Directors'' to read ``Director''.

    Dated: October 7, 2008.
James B. Lockhart III,
Director, Federal Housing Finance Agency.
 [FR Doc. E8-24320 Filed 10-16-08; 8:45 am]
BILLING CODE 8070-01-P